Daily Briefing: Macron sets out foreign policy stall

Reuters Staff

7 Min Read

LONDON (Reuters) - After his tour of eastern Europe last week and yesterday's Paris summit on migration, Emmanuel Macron is expected to give more detail on his vision for a post-Brexit European Union and France's wider foreign policy goals at an annual speech to the country's ambassadors today.

French President Emmanuel Macron and his dog, a labrador crossed griffon named Nemo, leave at the Elysee Palace to greet a guest in Paris, France, August 28, 2017. REUTERS/Charles Platiau

The set piece event comes as the French domestic calendar gets busier after the summer holidays: both the head of the national employers’ federation and the large CGT trade union are due to speak today, with Macron’s promises to overhaul French labour law likely to be the focus.

Britain will make listed companies publish and justify pay ratios between bosses and workers, part of Prime Minister Theresa May’s plans to tackle what she calls the "unacceptable face of capitalism". Listed firms with significant shareholder opposition to executive pay packages will also have their names included on a public register and employees will be given a voice in the boardroom.

May is keen to push her domestic agenda and tackle corporate responsibility - yet opposition politicians and unions say the measures are too weak. Indeed, most companies affected are already compliant because their shareholder votes are public and so remuneration levels are known.

More good news for Angela Merkel ahead of a Sept. 24 national election she is hot favourite to win: data from the GfK institute showed the already buoyant mood among German consumers improved further heading into next month, ahead of analyst expectations. Household spending has overtaken exports as the main source of economic expansion in Europe's largest economy as consumers benefit from record-high employment, increased job security, rising real wages and low borrowing costs.

Rising geopolitical tensions are set to hit European shares with equity index futures down 0.5-0.7 percent. Such falls will be enough to send the STOXX 600 to its lowest levels in nearly six months at the open, putting the index firmly on track to end August down for the third month in a row.

With Jackson Hole wrapped up without any big change to monetary policy expectations, a mixed earnings season almost finished and political turmoil at the White House, catalysts that could support European equities are scarce and some investors expect a correction, even though valuations in the region look again attractive relative to Wall Street.

A man walks past a TV set showing North Korea's leader Kim Jong-Un in a news report about North Korea's missile launch in Tokyo, Japan, August 29, 2017. REUTERS/Kim Kyung-Hoon

On the corporate front, ProSiebenSat shares are down 2.6 percent pre-market after the broadcaster said it was looking for possible external investors to back its content production and digital commerce businesses, potentially via separate stock market listings. Among small companies, ADVA Optical Networking was down nearly 10 percent pre-market after the German network equipment provider cut its sales outlook for the third quarter.

MSCI’s main index of Asia-Pacific shares, excluding Japan, is down 0.4 percent and Tokyo stocks hit a four-month low before closing down 0.4 percent in the wake of the missile test. South Korea’s KOSPI index is down 0.5 percent. Australian shares ended 0.8 percent lower.

The dollar, already weakened after U.S. Federal Reserve Chair Janet Yellen made no mention of monetary policy at a meeting of central bankers in Jackson Hole on Friday, fell further against a basket of currencies. It hit a four-month low against the yen, which last stood at 108.90 per dollar, up 0.3 percent on the day.

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The euro topped $1.20 for the first time since early January 2015, lifted by European Central Bank chief Mario Draghi expressing no concern about its strength at Jackson Hole. The Swiss franc was up 0.3 percent at 0.952 per dollar.

Core government bond yields fell. German 10-year yields hit their lowest in two months at 0.35 percent. U.S. equivalents were down 2.4 basis points at 2.13 percent, just above a two-month low of 2.12 percent hit earlier.

EM stocks edged further off the three-year highs hit last week and currencies fell against the dollar as risk aversion gripped world markets following North Korea’s missile test. The greenback’s weakness however is offering some support, boosting the yuan towards the highest since June 2016.

Monitoring Ukraine bonds, CDS after Moody’s raises credit rating by a notch to Caa2. Checking Korean CDS too for updates though early reaction seems to have been muted.

The Israeli shekel is flat before a central bank meeting that is expected to leave rates unchanged at 0.1 percent at 1300 GMT.

Brent crude oil is up 23 cents at $52.12 per barrel while gasoline futures are up 1.5 percent. Metals are up again. Nickel rose 1.5 percent to $11,655 a tonne, having hit its highest since November. Copper is up 1.6 percent at $6,771 a tonne, close to a recent 34-month peak.